replacement reserve

(redirected from Operating reserve)
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Replacement Reserve

In real estate accounting, money set aside to purchase new materials that are expected to be bought as older materials wear out and need to be replaced. The replacement reserve may be listed on a financial statement as a phantom expense, and may be credited back if it is not actually spent.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

replacement reserve

An amount of money set aside because building components or equipment will wear out in a relatively short time and need to be replaced.Replacement reserves can be a mere accounting entry as a phantom expense item reducing net operating income each month, or it can be money actually deposited into an account and earmarked for replacements.If the money is set aside into a separate account,any contract for the purchase of that property or business should include a clause addressing who gets the money—the purchaser or seller.When purchasing a condo or co-op,or a home in a planned unit development,the buyer should make sure there are adequate cash replacement reserves for the future.If not, then repairs will not be made or they will be made only after assessments against all owners.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
On Saturday, the National Grid Corporation of the Philippines placed the Luzon Grid under Yellow Alert due to insufficient operating reserve. Meralco explained that the yellow alert means the reserve power is low.
"In the event that they make excess revenue each year, we'll set up an operating reserve and capital reserve fund to help with the perpetuation of the foundation."
Income generated by the Barrow Group's training program has accordingly multiplied by 10, its debt has been eliminated, and a six-month operating reserve has been amassed.
On September 3, 2018, the Independent System Operator for New England (ISO-NE) declared such an event when sudden outages at two large natural gas units combined with higher than forecast power demand resulted in an operating reserve deficiency or scarcity event.
"As we try to maintain the operating reserve margin above 6 percent through the end of June, Taipower will do maintenance on holidays when electricity consumption is lower to minimize the impact," Taipower spokesperson Hsu Tsao-hua told CNA.
Opera Idaho has a $900,000 operating budget with a $0,000 operating reserve, which allowed the company to move forward with considering building a theater, something that opera leaders have been talking about for more than years, Junkert said.
A key area of focus for many clients is cash reserves, including ensuring they have enough cash to pay the bills, that they're establishing and maintaining a liquidity or operating reserve, and saving for future investments in the organization's operations.
He noted the board established a standing board policy that the Bar's operating reserve should not exceed 67 percent or fall below 33 percent of the annual operating expenditure budget.
Consumers ended up paying up to PS2,500 per MWh (average wholesale price was PS40/MWh) to reserve generators to meet the shortfall and calling on equally expensive, and much dirtier, dedicated diesel generator parks in the Short-Term Operating Reserve. Large industrial consumers were also paid to reduce consumption.
In addition to the call for reductions in operating reserve and concern for the growth in accumulated surplus, there was a recommendation to retain an independent consultant to review NAIC processes and practices.
There are two types of reserve: an operating reserve that must be available within 10 minutes or so, and a replacement reserve which takes over within an hour.
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